Pricing Construction Work: a Marketing Viewpoint

Recent work on pricing has shown that neo-classical microeconomic theory (NCMT) is preferred to tendering theory and that implied by absorption, or full-cost, pricing of construction work because of its explicit treatment of market conditions, competitor behaviour and firm capacity levels. Applying NCMT in practice, however, requires the consideration of pricing from a marketing perspective. This paper examines the challenges involved in terms of the a marketing perspective to NCMT of pricing in practice, however, requires consideration of pricing fromproduces challenges, t a marketing perspective. he This paper examines examining the relevance of two prevalent marketing paradigms – marketing mix and relationship marketing – to pricing construction work generally, and the traditional contracting (TC), design and construction (D&C) and speculative building (SB) procurement systems in particular. In general, the marketing mix (MM) approach, which havings a the closest fit with NCMT, is concluded to be the most favoured inaligned to current practice. However, conceptual and practical limitations are identified. Relationship marketing (RM), on the other hand, is theoretically more applicable, but seems to have beenyet has been largely overlooked in practice due to the transaction costs and investment involved. Nevertheless, some relationship marketingRM tools are increasingly being adopted in response to demand